Lifetime Value with Customer Acquisition Cost is an essential metric for monitoring the operations of your business. In this metric, you will be able to compute the total value of a customer and compare it to the amount of acquiring them. It will help you to check the effectivity of your spending. It can also give you with information for justifying your customer acquisitions spend.
Calculate Life Value & Customer Acquisition of Customer
Gross Margin % x (1/Monthly Churn) x Avg. Monthly Subscription Revenue per Customer: Sales and Marketing Costs/ New Customers Won
C-Level, VP/ Director
CMO, CEO, Sales Manager, Marketing Manager
In this metric, the KPI target sample is 3:1. The metric can be calculated by dividing the LTV by CAC. It is also considered as the signal of customer profitability as well as sales marketing efficiency.
The Benefits of Determining LTV & CAC
LTV: CAC metric can meet challenges on a number of fronts, especially if you are trying to point acquisition costs to customer segments or individual accounts. Adding up sales and marketing costs on a specific time can be misleading to CAC perspective. Usually, sales resources and marketing are not mainly focused on new customer acquisition.
If you want to monitor real-time LTV: CAC, you can use SaaS Dashboard. If you optimize the cost to recover your CAC through integration costs or mandatory training, you can get more profits.